Policy Documents

The Dodd-Frank Wall Street Reform & Consumer Protection Act of 2010: Is it Constitutional?

C. Boyden Gray and John Shu –
December 1, 2010

President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank” or “the Act”) into law on July 21, 2010.

Dodd-Frank is extraordinarily complex, appearing to require almost a dozen different federal agencies to complete anywhere between 240 to 540 new sets of rules, along with approximately 145 studies that will very likely affect rulemaking. This count does not include situations where different agencies create different rules that govern the same activity.  This new, expansive regulatory regime prompted former Fed Chairman Alan Greenspan to argue that Dodd-Frank’s “unprecedented complexity” and its “inevitable uncertainty” will negatively impact economic growth, inhibit financial innovation, and “render the rules that will govern a future financial marketplace disturbingly conjectural.”
 
There has been much debate over whether Dodd-Frank will accomplish its stated intent, but there is also a growing exchange about whether the law is constitutionally infirm, primarily due to separation of powers, vagueness, and due process. Central to this discussion is the fact that Dodd-Frank grants bureaucracies broad and unchallengeable discretionary authority; we query whether the Act provides effective oversight by any branch of government—the President, Congress, or the Judiciary.

This paper focuses on the constitutional issues which three of the law’s most central grants of regulatory power raise:  the Financial Stability Oversight Council (“FSOC”) and its powers in Title I, the Federal Deposit Insurance Corporation’s (“FDIC’s”) related liquidation authority in Title II, and the Bureau of Consumer Financial Protection (“BCFP”) in Title X.